The Roots of the Financial Crisis

Power Line: The Roots of the Financial Crisis

In the New York Post,
Stanley Kurtz looks for the origins of the current financial crisis and
finds them in the activities of ACORN, and Barack Obama, dating back to
the mid-1990s:

FOR years, ACORN had combined manipulation of the CRA with
intimidation-protest tactics to force banks to lower credit standards.
Its crusade, with help from Democrats in Congress, to push these
high-risk "subprime" loans on banks is at the root of today's economic
meltdown. ...

As ACORN ran its campaigns against local banks, it quickly hit a
roadblock. Banks would tell ACORN they could afford to reduce their
credit standards by only a little - since Fannie Mae and Freddie Mac,
the federal mortgage giants, refused to buy up those risky loans for
sale on the "secondary market."

That is, the CRA wasn't enough. Unless Fannie and Freddie were
willing to relax their credit standards as well, local banks would
never make home loans to customers with bad credit histories or with
too little money for a downpayment.

So ACORN's Democratic friends in Congress moved to force Fannie Mae
and Freddie Mac to dispense with normal credit standards. Throughout
the early '90s, they imposed ever-increasing subprime-lending quotas on
Fannie and Freddie.

But then the Republicans won control of Congress - and Rep. Roukema
scheduled her hearing. ACORN went into action to protect its golden
goose. ...

ACORN's intimidation tactics, and its alliance with Democrats in
Congress, triumphed. Despite their 1994 takeover of Congress,
Republicans' attempts to pare back the CRA were stymied.

Instead, Democrats like Rep. Barney Frank (D-Mass.) and Reps.
Kennedy and Waters allied with the Clinton administration to broaden
the acceptability of risky subprime loans throughout the financial
system, thus precipitating our current crisis. ...

WHEN the ACORN-Democrat alliance finally succeeded in blocking
Republicans from restoring fiscal sanity in 1995, the way was open to
virtually unlimited lending quotas - and to a whole new way of thinking
about credit standards.

Urged on by ACORN, congressional Democrats and the Clinton
administration helped push tolerance for high-risk loans through every
sector of the banking system - far beyond the sort of banks originally
subject to the CRA.

So it was the efforts of ACORN and its Democratic allies that first
spread the subprime virus from the CRA to Fannie and Freddie and thence
to the entire financial system.

Soon, Democratic politicians and regulators actually began to take
pride in lowered credit standards as a sign of "fairness" - and the
contagion spread.

And when financial institutions across the board saw that they could
make money by trading what would once have been considered junk loans,
the profit motive kicked in. But the bad seed that started it all was
ACORN.

HOW does Barack Obama fit into all of this? Obama has been a key
ally of Chicago ACORN going back to his days as a community organizer.

Read it all. One of the common themes of modern American history is
that liberals will create a problem by ill-advised government action,
then benefit from it politically by proposing ever more intrusive
government action to solve it. That appears to be happening again in
connection with today's credit crisis.